In the market Wednesday the selling intensified across all the Stock Market Indexes leaving the closing deep in the red. Before I address a situation in the VIX chart that will be in play the next couple of days, I believe it is time to stand back and take a look at the long term charts of the S&P.
The first chart shown is the 35-year chart of the S&P using monthly bars showing how the past two months we finally maxed out on the incredibly steep 6-year blue channel.
The second chart is the 12-year chart of the S&P using weekly bars where we get a better view of the topping action at the upper blue channel line.
The third chart is the 2.5 year chart of the S&P where we see today's selling frenzy was partly driven because we lost the lower line of the channel that Bernanke started to ease the pain of the coming QE withdrawal.
These three charts show that the big picture is at least questionable now.
For the next few days, however, the VIX chart will become top priority. The short term VIX chart (the last chart) will be everyone's focus to determine if the August 1st VIX peak at 17.62 holds and gives the stock market some bounce back or if we break through it and the real selling begins.
Looking at this VIX chart we can see that we have tested this ceiling of 17.62 (shown with the heavy red line) twice this week and it has held so far. Considering that double test, the odds of a market bounce Thursday have substantially increased. If the market does bounce, it's not too late to undo some of the damage done to Tuesday night's charts during Wednesday's selling.